The FTC’s Missed Opportunity on Google

Jan. 3 (Bloomberg) -- For almost two years, the U.S.
Federal Trade Commission has been investigating allegations that
Google Inc. unfairly dominates the Internet search market. The
consumer agency ended the case today without bringing charges
over the main issue -- whether Google favors its own products in
search results and, consequently, stifles competition.

The FTC missed an opportunity to explore publicly one of
the paramount questions of our day: Is Google abusing its role
as gatekeeper to the digital economy? Lawmakers, economists,
other regulators and consumers should all be in on this
important debate over whether Google is leveraging its
overwhelming dominance of search into unassailable market power
in other areas.

There is some evidence it is. When a consumer looks for
flights on Google, the search engine first provides a short list
of airfares offered by Google’s advertisers. Next comes a
“Google flight search” box listing the major carriers and their
prices. Only after that do online travel services, including
Expedia, Kayak and TripAdvisor, appear. They often provide less
expensive fares, yet require more time filtering through
numerous options.

As far as Google is concerned, it’s making life easier for
searchers by listing its service first, and those wishing to use
the discounters are free to keep clicking.

Shopping Around

Price comparison websites are another example. Such
services, in existence since the 1990s, are highly dependent on
Google, by far the dominant search engine in the U.S. and
Europe, to bring potential customers to them. Google’s own
shopping service, Google Shopping, caught on slowly (it was
originally called “Google Product Search”) until Google began
inserting its own price-comparison site near the top of Google
search results, pushing down competitors’ listings and thus
reducing chances that a consumer would click on them.

Google claims not to be gaming its algorithms to favor its
own services. Yet at a Senate hearing a year ago, Chairman Eric
Schmidt said this: “We give preference in the context of our
best judgment as to the sum of what the person wants to do.”

In other words, Google assumes that consumers who search
for TV prices or airfares don’t want to be directed to yet
another search engine. As Google posted on its blog today, its
so-called specialized search results “can save you the hassle by
providing direct answers to your questions” before providing
links to other sites. The strategy has worked: Google Shopping
ranks among the highest product sites, while traffic to rivals,
including Nextag, Shopper.com and PriceGrabber, has plummeted.

Fair or unfair? The FTC, in considering that Internet
search is free and that many alternatives are just a click away,
voted unanimously not to bring a search-bias case. Still, legal
experts are split over whether Google’s practices violate
antitrust statutes. Google may not have an obligation under
existing law to neutrally direct Internet traffic, but that
could be because lawmakers never envisioned that one company
would emerge as a public utility of sorts for e-commerce.

The European Union’s competition authority, meanwhile, is
running a similar investigation and may soon accomplish what the
FTC concluded it should not. Google committed to the EU last
month that it would outline changes to the way it displays its
own services in search results “as compared to services of
competitors.”

Pushing Back

State attorneys general, consumer advocates and some
lawmakers may push back against the FTC. Google’s competitors,
notably Microsoft Corp., which hopes to use the same antitrust
laws that were used against it in the 1990s against its biggest
rival now, are also likely to be livid.

The commission’s job, however, is to safeguard consumers,
not corporate rivals. U.S. antitrust laws don’t give
trustbusters the authority to protect competitors, as European
Union law does. Still, at the root of the case, on both sides of
the Atlantic, is the same vital issue: Is Google thwarting
competition and thereby limiting consumer choice and reaping the
benefit? If so, it’s up to the FTC to invoke relevant antitrust
laws and make it stop.

Ask yourself this simple question: Am I harmed when rival
services, whether for product comparisons, hotel bookings,
airfares, restaurant reviews or maps, go out of business because
they can’t compete with Google? We suspect the answer is yes.